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Your Tax Dollars at Work

An acerbic, sometimes strident polemic about how a very few have gotten a great deal richer

Free Lunch

How the Wealthiest Americans

Enrich Themselves at Government Expense

(and Stick You with the Bill)

By David Cay Johnston

Portfolio; 323pp; $24.95

Most people will remember that President George W. Bush once was a part-owner of the Texas Rangers baseball team. Some might even recall that Bush and his partners sold the team in 1998 for a $164 million profit. But New York Times investigative reporter David Cay Johnston makes an argument that few will have heard before. Bush and his team team, argues Johnston, made their profits not by building their business but by extracting taxes from fellow Texans. In his new book, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill), Johnston deconstructs the Rangers episode as an example of what he sees as a pervasive trend: the tendency of the nation's monied elite to bend the rules of capitalism for their own benefit. In the case of the Rangers, Johnston details each of the subsidies the baseball team won from the state, including an interest-free rent-to-own stadium deal financed in part by a state sales tax hike. Johnston says taxpayer subsidies paid to Bush's ownership group totaled $202.5 million—$38.5 million more than their profit when they sold the team. Subsidies like the Rangers deal, Johnston writes, are "just a government sponsored transfer of wealth from the many to the few."

Johnston sounds that theme again and again, a populist kick in the gut that uses the tools of the investigative reporter's trade: disgruntled sources, deep document dives, and the author's aggressive skepticism. If there's a fault in the work, it's the author's occasionally shrill tone, which may turn off rather than persuade some readers.

Free Lunch is a sprawling project. In just the first few pages, Johnston rails against lobbying, outsourcing, federal tax loopholes, private military contractors, stock option backdating, and the politicization of the Justice Dept. He quotes fictional Wall Street raider Gordon Gekko (unfavorably) and Jesus Christ (favorably). He all but predicts violent revolution will result from continued global job outsourcing. If the reader can keep all the details straight—Johnston goes deep into the intricacies of HMOs, energy markets, and even the retail sporting goods industry—what emerges is a mountain of evidence that free markets aren't always free.

The book veers off course when the Pulitzer Prize-winning reporter stops crafting insightful journalism and starts writing overwrought speeches. The dominant group of politicians in Washington, Johnston opines, "work to create a paradise of corporate socialism for the few." Elsewhere he says that executives in the stock option backdating scandal "differ from bandits only in that they wielded pens...instead of pointing pistols." And he pushes the material beyond a simple policy debate into the realm of ethics, circling back to Bible quotations to show that the rich aren't just self-interested but immoral. After detailing the subsidies that he charges were unjustly doled out to sporting goods chain Cabela's (CAB), he quotes Jeremiah 22:13: "Woe unto him that buildeth his house by unrighteousness." In a policy book, that's laying it on pretty thick.

Even so, the penetrating anecdotes carefully researched by Johnston and his team of reporters make this a compelling look at just how the game can be altered to serve the wishes of the well-connected few. The author reveals how homeowners' title insurance is larded with unnecessary costs for home buyers, how government subsidies prop up a posh golf course in Oregon, and even how Warren Buffett's GEICO insurance company got $100 million in subsidies for a $40 million call center. In one chapter he argues that home alarm companies benefit from a hidden subsidy, too; what they're ultimately selling is a service—police response—that they pay nothing to provide. Worse, he says, the thousands of false alarms actually make communities less safe, since the cops handling them aren't out on the beat deterring real crimes.

Particularly galling to Johnston is that some industries dipped into the government trough at a time—1980 to the present—when the vast majority of Americans' share of national income declined slightly, while it skyrocketed for those at the very top. The rich, as they say, get richer. Johnston argues that government is to blame.